Forget Obamacare, the Market’s Getting ‘Bernanke-care’

While the nation is getting Obamacare, now that the Republican gambit to defund it has failed, the market is getting “Bernanke-care,” and that’s all that matters.

“Steadfastly optimistic,” is how Bank of America/Merrill Lynch describes the mood among the managers it surveyed for its latest global survey of fund managers. “Asset allocation has been undisturbed by events in D.C.,” the firm’s chief investment strategist, Michael Hartnett, wrote in a note. “Global adoption of ‘Bernanke-care’ means investors [are] long stocks, real estate, cyclicals and short bonds, commodities, defensives.”

The monthly survey was conducted Oct. 4-10, and included 235 panelists who have $643 billion in assets under management. What’s notable about that? It means these fund managers were having their brains picked during the partial government shutdown.

The managers were paying attention to the morass in Washington. The effects of the budget fight and its implications for fiscal policy were considered the second largest “tail risk” by fund managers. A month ago, it ranked number six. The vague “geopolitical crisis” was the biggest risk a month ago; a hard landing in China was the third most cited risk in October; it was second in September.

They’re not exactly bullish on the economy, though. The percentage of managers who expected growth would be stronger over the next 12 months fell to 54% from 69% in last month’s survey. Still, only 2% of managers thought the global economy was in recession. Most pegged it somewhere between early cycle and late cycle. But 71% think global growth will be “below trend” over the next year, up from 61% last month.

They’re also down on corporate profits. Only 28% expected corporate profits to improve over the next 12 months, down from 41% in September. Eighteen percent now expect margins will contract over the next year, up from 11% a month ago.

But the takeaway, at least the one we took away from the survey, is that despite their misgivings, fund managers are comforted by the existence of “Bernankecare” (and it’s amazing nobody’s come up with that moniker before). While everybody knows, of course, that Mr. Bernanke’s term as Fed chairman is over, the assumption is that Janet Yellen, the current vice chair and proposed successor, is just as dovish.